Land betterment charge rates for residential, commercial, industrial, hotel uses raised
Land betterment charge (LBC) rates for various use groups, including residential, commercial, industrial, and hotels, have been increased for the first time since a review in September 2011. The new rates for the period from March 1 to Aug 31 were announced on Feb 29 after a review by the Singapore Land Authority in consultation with the taxman’s chief valuer. Developers pay LBC for the privilege of enhancing the use or building larger projects on specific sites.
For landed residential use, LBC rates have seen an average increase of 7.8%, primarily driven by the strong demand in this property segment. The surge in prices for landed homes in 2023, with an 8% increase, contributed to this upward trend. However, some analysts, such as Ms Tay Huey Ying from JLL, express surprise over this rate hike, especially given the second-half slowdown in landed home prices due to recent property curbs.
In contrast, rates for non-landed residential use experienced a modest average increase of 0.1%, following a previous reduction of 3.2% from Sept 1, 2023, to Feb 29, 2024. This discrepancy is attributed to the faster rise in assessed land values for landed homes compared to non-landed residential properties.
Analysts, including Nicholas Mak from Mogul.sg, and Leonard Tay from Knight Frank, note that the LBC rate increases for non-landed properties are prominent in specific areas like Clementi and Toa Payoh, where government land sale (GLS) sites were awarded at higher rates.
LBC rates for industrial use grew by 1.7%, while rates for hotels and hospitals inched up 0.7% on average. The latter was particularly noted in the CBD and Orchard areas, where hotels have experienced heightened demand from leisure and business travelers.
However, rates for commercial use saw a more significant increase of 3.8% on average, posing potential challenges for commercial collective sales in the near term. This rise is linked to higher LBC rates in Orchard Road and the Central Business District, likely influenced by significant commercial collective sales in Far East Shopping Centre and Shenton House.
Despite these changes, LBC rates for places of worship/civic and community institution use remain unchanged, as do rates for other use groups covering open space/nature reserve, agriculture, and drains/roads/railways. Overall, analysts anticipate that the increased LBC rates, especially in specific sectors, may impact land banking decisions by developers, leading to a more cautious approach amid economic uncertainties and cooling measures in the real estate market.
